Minister of Finance Natalie Jaresko attends meeting to discuss taxes on tobacco products

12/8/15

On December 8, Minister of Finance of Ukraine Natalie Jaresko took part in the discussion meeting "Tax reform and fight against corruption: application of international experience in Ukraine”. The main point of the discussion were issues related to the taxation of tobacco products in the context of the new Tax Code presented by the Ministry of Finance.

In her contribution to the discussion the Minister of Finance pointed out that low domestic tobacco prices foster the smuggling of cigarettes to the EU-countries which often criticize Ukraine for this situation. Natalie Jaresko also stressed that the issue of the excise tax on tobacco products should also be addressed having in mind healthcare policy.

«The excise issue is a rankling one, but I can’t be silent on that bearing in mind the health of the nation, since the excise policy in every country goes hand in hand with healthcare policy. The thing is that we spend our budget for healthcare as well. Hence, we must keep a balance between our responsibility towards our European partners and our market interests. We are now trying to find this equilibrium», Natalie Jaresko said.

The Minister of Finance informed that according to the draft tax reform proposed by the Ministry of Finance the specific excise on tobacco products should be raised by 40%, the ad valorem tax should be increased by 3% to reach 15%. Experts of the Ukrainian Center for Tobacco Control estimate that these steps shall increase the annual state revenues by UAH 7.5 b taking into account that the tobacco market has shrunk by 10%.

The discussion meeting was also attended by representatives of the Rehabilitation Reform Package, Ukrainian Center for Tobacco Control, civil organization «Zhyttya» and Coalition «For smoke-free Ukraine». All of them expressed their support for the Ministry’s initiative. The civil activists claimed that the increase of the specific excise on cigarettes shall pose an important step in adjusting the Ukrainian laws to the European regulations meaning that Ukraine should adjust its excise rates for tobacco products to the minimum rates valid in the EU.

The minimum excise rate in the EU is now equal to EUR 90 for 1000 cigarettes compared to UAH 304.11 (EUR 12) now valid in Ukraine. In the end of the discussion the participants agreed that Ukraine should increase cigarette prices above the inflation rate. This shall help reduce tobacco consumption, generate additional revenues for the state budget and contribute to the image of Ukraine as a reliable partner abiding to its international obligations.

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